Sustainability and Competition Global Practice Guide |
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Australia |
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| (Asia Pacific) Firm Clayton Utz Updated 06 Sep 2022 | |
| Are ESG measures/sustainability agreements included in your jurisdictional competition regime? | Australia’s competition regime allows for exemptions to be granted for ESG measures and sustainability agreements, on a case-by-case basis, as these are not the subject of any specific exclusions. Where an ESG measure or sustainability agreement may risk infringing Australian competition law, the parties involved can apply to the Australian Competition and Consumer Commission ("ACCC") for authorization of their conduct which allows the ACCC to grant specific exemptions from relevant provisions of Australian competition laws for a specified period and in some cases subject to conditions such as reporting. The ACCC can grant authorization to any ESG-related conduct if it is satisfied that the proposed conduct is either:
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| If ESG measures/sustainability agreements are not included in your jurisdictional competition regime, do you foresee any new regulations coming into place in 2022? | Neither the ACCC nor the Australian Government has foreshadowed any new regulation in this field to add to the existing authorization process described above. The ACCC’s main focus to date in the area of environmental measures is granting a series of authorizations to allow companies to collaborate on ESG measures such as renewable energy procurement, e-waste collection, recycling and product stewardship and joint procurement of waste collection and recycling. Using its consumer law powers the ACCC is also scrutinizing businesses who make false, misleading or deceptive environmental or sustainability claims (“greenwashing”). Greenwashing is one of the ACCC’s enforcement priorities for 2022-2023. Greenwashing is one area where misleading conduct in relation to ESG initiatives may become the subject of enforcement action or ACCC investigation. |
| Has your Authority issued any guidance on the role, if any, of ESG in the competition law analysis applied to mergers or other conduct? | The ACCC has not published specific guidance in relation to the authorization of ESG-related initiatives but has published general guidance on the authorization process which confirms that the ACCC will consider the social and environmental benefits of conduct when deciding whether to authorize a given proposal. The ACCC’s informal merger review guidelines do not address ESG issues as the principal merger test solely concerns competition issues. Ordinarily, the ACCC provides clearance for mergers through an informal clearance process by assessing whether a proposed acquisition is likely to substantially lessen competition in an Australian market, and as such, ESG and environmental benefits are of no relevance to that test. However, there is a second merger control pathway in Australia where ESG considerations may be considered, under the ‘public benefit’ standard for formal authorization of a merger. There are very few merger decisions considering ESG factors. One case where environmental factors were considered concerned authorization of a merger of two manufacturers of glass containers in a 1991 decision1. In a more recent decision2, environmental benefits were put forward in support of a merger of a coal-fired generator but were given little weight by the Australian Competition Tribunal. An acquisition may receive clearance through the formal merger authorization process if the ACCC finds that the acquisition is:
The ACCC’s guidance on this process specifies that any environmental benefits of a merger will be considered during this process.
__________ 1 ACI Operations Pty Ltd (1991) ATPR (Com) 50-108 2 “Other aspects of the public interest put forward ...the Tribunal found to be more speculative. The Tribunal has afforded them little weight. They include a reduced environmental impact;...... This is not to say that such results would not be public benefits. Rather, the Tribunal does not consider that the evidence is such that it can conclude that these benefits are in fact likely to flow from [the merger].” Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1 at [245] |
| Has your jurisdiction issued guidance regarding competitor collaborations or participating in industry working groups, and if so, do they specifically address ESG? | The guidance that the ACCC has published in relation to participating in industry associations and in relation to anti-competitive conduct generally, refers to the authorization process for parties to seek an exemption on a case-by-case basis and does not specifically address ESG. |
| Can parties seek specific guidance from authorities on proposed ESG initiatives? | Yes, if parties are concerned that their conduct or proposed collaboration on ESG initiatives may contravene Australian competition laws, they can approach the ACCC to apply for authorization. |
| How, if at all, does your jurisdiction quantify or calculate the ESG effects? | See above: the ACCC assesses ESG effects in terms of the benefit they provide to the public and weighs this against the likely risks to competition from the conduct concerned. The ACCC through its authorization process encourages parties to quantify the ESG effects where possible but quantification of the benefits is not mandatory in all cases. |
| What does your legal authority currently permit even if your agency is not yet active on this topic? | See above: the ACCC may authorize otherwise anti-competitive conduct where the public benefits of that conduct (environmental, social or otherwise) outweigh the public detriment created by that conduct. |
| Are there precedents that involved ESG/sustainability matters in your country? If so please provide a short description. | Some recent examples of ACCC authorizations that have involved environmental or social public benefits include those noted in Section 3 above for mergers plus:
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| Is there specific antitrust regulation in your jurisdiction to be aware of which might give rise to private or class action ESG litigation? | No, however, in recent years Australia has seen an increase in class action private litigation which relates to claims of misleading and deceptive conduct/the failure to disclose information in relation to climate change and environmental risks. For example, in McVeigh v REST, a superannuation fund member brought proceedings against his superannuation fund alleging that it had breached various statutory requirements by failing to provide adequate information regarding climate change risks and the fund’s management of such risks. In 2020, the parties agreed to settle the litigation. |
Sustainability and Competition Global Practice Guide
Australia’s competition regime allows for exemptions to be granted for ESG measures and sustainability agreements, on a case-by-case basis, as these are not the subject of any specific exclusions.
Where an ESG measure or sustainability agreement may risk infringing Australian competition law, the parties involved can apply to the Australian Competition and Consumer Commission ("ACCC") for authorization of their conduct which allows the ACCC to grant specific exemptions from relevant provisions of Australian competition laws for a specified period and in some cases subject to conditions such as reporting.
The ACCC can grant authorization to any ESG-related conduct if it is satisfied that the proposed conduct is either:
- not likely to substantially lessen competition in Australia; or
- has public benefits which outweigh the likely public detriment of the conduct. Environmental or social benefits of conduct will be relevant to the latter limb of the test.
Neither the ACCC nor the Australian Government has foreshadowed any new regulation in this field to add to the existing authorization process described above.
The ACCC’s main focus to date in the area of environmental measures is granting a series of authorizations to allow companies to collaborate on ESG measures such as renewable energy procurement, e-waste collection, recycling and product stewardship and joint procurement of waste collection and recycling.
Using its consumer law powers the ACCC is also scrutinizing businesses who make false, misleading or deceptive environmental or sustainability claims (“greenwashing”).
Greenwashing is one of the ACCC’s enforcement priorities for 2022-2023. Greenwashing is one area where misleading conduct in relation to ESG initiatives may become the subject of enforcement action or ACCC investigation.
The ACCC has not published specific guidance in relation to the authorization of ESG-related initiatives but has published general guidance on the authorization process which confirms that the ACCC will consider the social and environmental benefits of conduct when deciding whether to authorize a given proposal.
The ACCC’s informal merger review guidelines do not address ESG issues as the principal merger test solely concerns competition issues. Ordinarily, the ACCC provides clearance for mergers through an informal clearance process by assessing whether a proposed acquisition is likely to substantially lessen competition in an Australian market, and as such, ESG and environmental benefits are of no relevance to that test.
However, there is a second merger control pathway in Australia where ESG considerations may be considered, under the ‘public benefit’ standard for formal authorization of a merger.
There are very few merger decisions considering ESG factors. One case where environmental factors were considered concerned authorization of a merger of two manufacturers of glass containers in a 1991 decision1.
In a more recent decision2, environmental benefits were put forward in support of a merger of a coal-fired generator but were given little weight by the Australian Competition Tribunal.
An acquisition may receive clearance through the formal merger authorization process if the ACCC finds that the acquisition is:
- not likely to substantially lessen competition; or
- has public benefits which outweigh the likely public detriment of the conduct.
The ACCC’s guidance on this process specifies that any environmental benefits of a merger will be considered during this process.
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1 ACI Operations Pty Ltd (1991) ATPR (Com) 50-108
2 “Other aspects of the public interest put forward ...the Tribunal found to be more speculative. The Tribunal has afforded them little weight. They include a reduced environmental impact;...... This is not to say that such results would not be public benefits. Rather, the Tribunal does not consider that the evidence is such that it can conclude that these benefits are in fact likely to flow from [the merger].” Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1 at [245]
The guidance that the ACCC has published in relation to participating in industry associations and in relation to anti-competitive conduct generally, refers to the authorization process for parties to seek an exemption on a case-by-case basis and does not specifically address ESG.
Yes, if parties are concerned that their conduct or proposed collaboration on ESG initiatives may contravene Australian competition laws, they can approach the ACCC to apply for authorization.
See above: the ACCC assesses ESG effects in terms of the benefit they provide to the public and weighs this against the likely risks to competition from the conduct concerned. The ACCC through its authorization process encourages parties to quantify the ESG effects where possible but quantification of the benefits is not mandatory in all cases.
See above: the ACCC may authorize otherwise anti-competitive conduct where the public benefits of that conduct (environmental, social or otherwise) outweigh the public detriment created by that conduct.
Some recent examples of ACCC authorizations that have involved environmental or social public benefits include those noted in Section 3 above for mergers plus:
- In September 2020, the ACCC granted authorization for the Battery Stewardship Council to impose a levy on imported batteries and for this levy to be passed on to consumers. The levy will fund rebates for those providing battery recycling services. The ACCC considered the scheme would provide “significant environmental benefits, increased public awareness of battery disposal and re-use, and supporting increased innovation, research and development.”
- In August 2021, the ACCC authorized a series of companies including Equinix, HSBC Bank, Nike Australia, Goldman Sachs and H&M to pool their demand and collectively negotiate for the purchase of renewable energy for a period of 24 years. The ACCC considered that the conduct would have public benefits including greater investment in and competition for electricity supply, as well as environmental benefits resulting from a reduction in greenhouse gas emissions.
- The ACCC has authorized a number of codes including the New Energy Tech Consumer Code which sets minimum standards for suppliers of products including solar panels and energy storage systems, and the Ethical Clothing Australia’s Homeworkers Code of Practice which imposes obligations on businesses in the clothing supply chain to comply with certain workplace laws and standards.
No, however, in recent years Australia has seen an increase in class action private litigation which relates to claims of misleading and deceptive conduct/the failure to disclose information in relation to climate change and environmental risks.
For example, in McVeigh v REST, a superannuation fund member brought proceedings against his superannuation fund alleging that it had breached various statutory requirements by failing to provide adequate information regarding climate change risks and the fund’s management of such risks. In 2020, the parties agreed to settle the litigation.